The cost of repairing your ride is soaring

This is Bloomberg Opinion Today, a compendium of Bloomberg Opinion’s opinions to give future historians something to think about. Sign up he [Bloomberg]( This is Bloomberg Opinion Today, a compendium of Bloomberg Opinion’s opinions to give future historians something to think about. [Sign up here](. Today’s Agenda - Modern cars are expensive computers on wheels — so [when they crash, it gets pricey](. - Stock-like returns, cash-like stability — yup, [too good to be true](. - Despite the hype, [India isn’t the next China]( just yet. Damage (Out of) Control When I turned 30 — more years ago than I care to count — I went through an early midlife crisis. I died my hair blonde, got my ear pierced, and bought a second-hand British convertible sports car. The TVR Chimaera was stunningly beautiful, ridiculously quick — and utterly unreliable. Source: [( By the time I offloaded the vehicle, I reckon it had spent almost as much time in the repair shop as it had blasting down the highway. As I recall, though, while the off-road periods were annoying and inconvenient, the bills weren’t particularly excessive. But times have changed. The unlucky owner of a Rivian Automotive Inc. pickup truck was involved in a low-speed rear-end collision in February. The final cost of the repair, initially estimated at $1,600? A staggering $42,000 which, as Chris Bryant notes, [isn’t far off the average price of a brand-new vehicle](. Soaring prices for used cars, a pandemic-inspired increase in dangerous driving — those empty roads encouraged speed demons — and shortages of both spare parts and the technicians needed to fit them are all contributing to bigger losses for auto insurers, leading them to hike premiums. “Another less-explored issue is the increasing complexity of fixing vehicles,” Chris writes. “Unlike some of those other factors, that won’t change once supply chains and labor markets revert to normal.” In the US, the average price of auto repairs is increasing at an annual pace of 20%; in the UK, costs jumped by one-third in the first quarter. A modern car can contain as many as 3,000 semiconductors, making them “essentially very expensive computers on wheels,” Chris writes.  A replacement windshield that once cost $300 can now set you back more than $1,000 if it has technical features such as a head-up display. Even a new headlamp can cost as much as 8% of the value of the entire car. And the proliferation of electric vehicles adds a whole new layer of cost and complexity to even minor crashes. “It will be a long time before we’re all whizzing around in driverless cars that never crash,” notes Chris. “In the meantime, vehicle owners should brace for their car insurance premiums and repair bills to remain high.” When Mark-to-Myth Conceals Mark-to-Market Losses Everyone knows there’s no such thing as a free lunch — until they’re seduced by what looks like a buffet of riskless riches. Direct lending — private loans made by investors to small and midsize companies, mostly owned by private equity funds — seems to offer returns akin to those available in the stock market, but without the associated volatility. “Like countless investments before it that promised big profits with little risk, [it’s probably too good to be true](,” cautions Nir Kaissar. The volatility of the direct-lending index, measured by annualized standard deviation, has been 3.5% since inception. That’s closer to the 0.8% volatility of Treasury bills than the 16.2% experienced by the S&P 500 index during the same period. “Think of a nearly uninterrupted upward sloping line, and that pretty much captures investors’ experience in direct lending,” Nir writes. But there’s a humongous caveat. Those volatility figures are plucked from thin air by the operators of direct-lending funds, who have little motivation to mark down their loans until and unless declines in value become too extreme to ignore. Higher interest rates, coupled with a sluggish economy hurting businesses, could destroy the mirage by freezing private companies out of the debt market and driving them into bankruptcy. “The volatility of private investments won’t seem so tame then, least of all direct lending,” Nir says. But with trillions of dollars at stake, “the lifeline for direct lending — aside from the fact that equity holders would be wiped out first — is that the business of private investments is already too big to fail. At this point, policymakers can’t allow private equity to collapse without bringing the economy down with it.” Telltale Charts Financial assets in India have outperformed their regional peers. Indian equities have attracted almost $10 billion in net foreign inflows since March, putting the market on track for the most in any quarter since the end of 2020. India’s benchmark index is the best performing in Asia during the second quarter. Despite this, “[India isn’t the next China yet](,” write John Authers and Isabelle Lee. “The word’s most-populous country is on a tear, but there’s some way to go before a game-changing reallocation.” Investing in Ocado Group Plc “has always been about jam tomorrow,” writes Andrea Felsted. “Yet if a bidder emerges for Britain’s online supermarket turned technology company, shareholders would have the opportunity to realize some value today. [They should seize it](.” Further Reading The world’s most highly valued education unicorn is heading toward [an “F” for strategy](. — Andy Mukherjee [Vladimir Putin’s nuclear threats]( demand a response. — Bloomberg’s editorial board Rate cuts are coming to Latin America, and [not a moment too soon](. — Juan Pablo Spinetto The West must offer the Global South [an improved deal](. — Andreas Kluth ‘[Life of the mother](’ abortion deals are still risky. — Sarah Green Carmichael A roasting Texas denies workers [the right to shade and water](. — Mark Gongloff Hang in there, renters. [Relief is on the horizon](. — Conor Sen ICYMI The US Navy detected [the Titanic-seeking submarine’s ‘catastrophic explosion’]( days ago. The world’s empty office buildings are creating [a debt time bomb](. [Crispin Odey’s downfall](shows how far women still have to go in the City of London. Russia’s war economy is being kept afloat by [bags of cash](. Kickers The North Atlantic is undergoing [a record rise in its surface temperature](. Europe’s empty churches are being repurposed [for drinking and dancing](. Notes: Please send weathered stone heads and feedback to Mark Gilbert at magilbert@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. 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